What The Analysts Asked Yahoo Today, And How The New CEO Responded

The markets didn’t punish Yahoo (NSDQ: YHOO) today when it announced it would appoint a payments technology specialist, Scott Thompson, as its CEO to run a business largely built on content, search and advertising. But it didn’t exactly reward it, either: the stock closed down by 51 cents at $15.82, a decline of some 3.1 percent.

Thompson, who officially starts his job on January 9, earlier today told investors in a call that his first priority will be to get to know the staff and culture that he will now be leading as he seeks to turn Yahoo around from a company that has lost its way back into a “great iconic brand.” Some have started to ask if he’ll have to take a crash course in Yahoo’s own business model, too:

Macquarie equity analysts were generally positive on the appointment, but they also took note of the fact that he is a specialist in payments, not advertising and media: still Yahoo’s stated main line of business.

“Yahoo should benefit from Thomspon’s leadership, but we must admit that we find the appointment somewhat surprising given Thompson’s background as a specialist in the online payments/technology space,” they wrote in a research note. “Yahoo has been in the midst of an identity crisis, unsure of its place on the Internet… All else equal, we would have preferred to see the Board hire a candidate with deeper experience in the online advertising/media space.”

They wonder, in fact, not whether he will master Yahoo’s business as it exists at the moment, but whether he will “surprise by defining and executing Yahoo’s vision in an unexpected way.”

Regardless, doing something unexpected was not the message being conveyed in today’s call, in which Thompson and Ray Bostock, the chairman of the board, sought to convey a balance between business as usual, and spring cleaning to unearth some hidden treasures.

Some of the questions asked by analysts on the call today:

Getting to know you: “The first thing is to meet the team as many as possible to understand more of the culture and the people,” Thompson said. He could be starting from a very blank slate indeed: Kara Swisher at AllThingsD alleges that Yahoo’s board, in fact, consulted “almost no one” in upper ranks about the appointment (but is that exactly standard?).

Who is Yahoo’s target customer? Is it you, the user? No, said Bostock: “Our customers are advertisers. Scott knows how to reach out to advertisers.”

Biggest lesson from PayPal to apply to Yahoo? “Balancing the consumer and merchant need,” said Thompson. “I feel strongly that we need that between the consumer and the content/advertising. [We need to make] this relevant to their business.”

What does Yahoo need to do next? Thompson mentioned user data, an area that could be one for privacy people to watch: “I only got a glimpse of [Yahoo’s] data [but] I feel certain that the wealth of data is going to be exploitable [for] super competitive capabilities in our space in advertising and marketing.” Also some non-speicific references to the talent, engineering and otherwise, that remains at Yahoo that needs to be used more to “build great innovative products and put them inside customer experiences.”

Yahoo going private? Doesn’t sound like it… “I don’t expect Yahoo not to be a public company going forward,” noted Bostock. “If we thought to take it private we’d have one hell of a challenge.” Going private was one option being floated last year, with founder Jerry Yang supposedly interested in teaming up with PE houses to buy up the company. TechCrunch, in fact, cited one financial analyst who said this determination to remain public was the main reason the stock didn’t do so well today.

What about Asia? The negotiations around Yahoo’s assets in Asia and their JV partners Alibaba and Softbank continue as before. “This will not be a distraction for Scott,” said Bostock. “There is a team working on that. [Thompson] will be a part of the key decision making but given where we are there is no way that this will be a distrction as he works on the core business.”

What about all those executive departures at Yahoo, especially last year? All I can do is speak from my track record,” said Thompson. “People determine the success or failure of all these business and whether you win or lose in the market… I want to make sure [the staff] are all here tomorrow and a year from tomorrow.” Great talk, but up against a challenging reality: as Om Malik puts it, the talent exodus at Yahoo is a one-way street at the moment, and its leading to well-paying jobs at the still-ascendant Facebook and Google (NSDQ: GOOG).

And what about mobile? This is one area of common ground between Yahoo and PayPal: both started as non-mobile companies and both took a stab at the market, realising the role it would increasingly play with consumers.

The difference is that PayPal found a place for itself, which is still growing, while Yahoo has moved in mobile in fits and starts and certainly has not developed something as meaningful as what its competitor Google has created in terms of a portfolio of mobile services and its own platform. “Mobile is a really big question. Mobile is a wave that is bigger than people can even imagine it to be,” says Thompson. But where he sees Yahoo fitting into that has yet to be articulated but I suspect he will put a stronger emphasis on this than his predecessor, given his track record at PayPal.

Still, where Thompson sounded most vague of all was on questions of how to approach advertising and content, which remain the company’s big business areas. Whether that was out of caution or a lack of ideas so far is unclear.

Interestingly, even with a dip in the share price today, Yahoo still closed the day higher than it did on the day when Bartz was announced as CEO nearly three years ago on January 13, 2009, when it traded at around $12.

(As an endnote, the WSJ has an overview of some of the more uncanny similarities between the two appointment announcements. On its own, it doesn’t make for a very encouraging picture of change at a company that really needs it.)